Massey sale decision came amid internal push over safety
CHARLESTON, W.Va. -- Massey Energy executives moved toward a sale to Alpha Natural Resources as internal pressures grew for a broad-ranging examination of -- and potentially major reforms in -- the company's long-troubled safety practices, according to new court documents made public Tuesday.
In November, a committee from Massey's board of directors was prepared to recommend creation of a "blue-ribbon" panel of outside safety experts, similar to the Baker Panel created by BP after the deaths of 15 workers in a 2005 refinery explosion.
The board committee also had determined that a change in the top leadership at Massey -- including then-CEO Don Blankenship -- was needed to rebuild the company's reputation and to regain the confidence of shareholders, regulators and public officials, according to the court documents, filed by lawyers who are seeking to block the Massey-Alpha transaction.
"The board thus realized that Blankenship had to go," the lawyers, representing a group of Massey shareholders, said in a legal brief supporting their argument for a preliminary injunction to at least stall the merger.
"It is clear at this point that the board realized the advisory committee viewed Massey's safety and regulatory issues as a pervasive, top-down problem that could only be remedied by many long months of outside experts auditing Massey's operations and making sweeping recommendations for wholesale change," the lawyers wrote. "Massey's reputation was so damaged that in its current state, it could not even attract the necessary candidates to staff a blue ribbon panel -- no one wanted to tough the assignment and risk potentially being linked to the likes of Blankenship."
Given the situation, the lawyers argue, Massey's board members realized "that they were left with few, if any, alternatives to a sale of the company."
The new court documents add to the growing intrigue as the June 1 date approaches for the boards of both Massey and Alpha to consider the proposed $8.5 billion transaction in which Alpha would take over Massey.
In separate lawsuits in West Virginia and Delaware, groups of Massey shareholders are seeking to block the deal. They argue that that it's a bad deal for Massey shareholders, and that corporate insiders would profit from it and perhaps insulate themselves from liability over poor management of Massey and the deaths of 29 miners in the April 5, 2010, explosion at Upper Big Branch.
A hearing in the West Virginia case had been scheduled for Wednesday, but was canceled by Kanawha Circuit Judge Charles King. Lawyers for the shareholders filed a motion asking King to seal records regarding their request for a preliminary injunction. King had not ruled on the motion as of Tuesday afternoon, and the records were being withheld pending the judge's decision.
In Delaware, a judge unsealed records about the motion for an injunction in anticipation of a Thursday hearing on that motion, filed by the New Jersey Building Laborers Pension Fund and other Massey stockholders.
The original, sealed Delaware filings brought an unusual response from Massey, which filed a disclosure with the U.S. Securities and Exchange Commission to dispute the suggestion that the Massey board had decided for sure that Blankenship needed to go.
"While the oral update of the committee included a recommendation that at a minimum the board of directors not re-nominate Mr. Blankenship for re-election to the board of directors ... and assess whether Mr. Blankenship as chairman of the board and chief executive provided the most viable option for Massey going forward, the independent members of Massey's board of directors did not make any decision on this matter and did not make a recommendation to the board of directors to remove Mr. Blankenship or request his resignation from his positions at Massey," Massey said in the SEC disclosure filed last week.
The new court filings also cite the deposition of Massey Board Chairman Bobby Inman in asserting that Inman believed increased enforcement at Massey operations was the result of a conspiracy between the United Mine Workers union and the Obama administration against mostly non-union Massey.
The filings also alleged that the Upper Big Branch disaster cost Massey more than $166 million in out-of-pocket costs and $320 million in lost coal revenues.
"The UBB disaster has crippled the company, and the directors have sought a quick sale of the company to avoid liability for their actions that led to the disaster," the court motion argues.
The Delaware documents were made public just one day after families of some of the miners who died at Upper Big Branch filed their own lawsuit, alleging that the Massey-Alpha deal would enrich corporate insiders, while putting at risk funds that could pay legal claims by the families.
Reach Ken Ward Jr. at firstname.lastname@example.org or 304-348-1702.